One of the most important factors in the profitability of an enterprise is the cost of the goods and services that it purchases in order to manufacture products, provide services or perform other functions in order to earn revenue. Any savings that can be achieved for an item, especially an item that is purchased in large quantities, leads to an improvement in the profit margins the enterprise is able to realize for the goods and services that it sells.
In order to understand the costs of and potential savings associated with purchases, it is useful for persons within an enterprise to have access to as much information about these costs and savings as possible. However, a large enterprise may make very large numbers of purchases, so that it is difficult to understand the significance of much of the information unless it is presented in a comprehensible way. Many individual items may have a relatively low cost, yet have a large cumulative effect because many units of the items are purchased. In addition, an item or category of items may be used in numerous different products, so that cost savings realized in purchases of the item can affect a category of products. Further, cost savings achieved for one product or a category of products may result from savings from a number of items and it would be useful to be able to evaluate an item such as a component, product, category of products, or other category of items, to determine what costs and savings have been realized and the source of those costs and savings and to determine the impact of costs and savings for one item or category of items on other items or categories of items.